The recent chronicles of the digital currency world have become the topic du jour, from Tesla buying US $1.5 billion in bitcoin, to regulatory warnings, to the U.S. Treasury Secretary Janet Yellen expressing her concern over the cryptocurrency. Closer to home, the central banks of China and UAE have launched a joint Hong Kong-Thailand initiative to explore the capabilities of Central Bank Digital Currencies, or “CBDCs”.
Some start-ups I have spoken to in the cryptocurrency space feel as though they are at the mercy of these narratives and the major competing forces behind them. Fear, uncertainty or doubt (or "FUD") is no stranger to the sector, but what has once resided on the likes of Twitter, Reddit and Telegram is now heavily in the mainstream. So this begs the question, what five things can brands in the cryptocurrency space do to protect their reputation and get on the front foot?
First is understanding the reality and subsequent need for transparency. Our Edelman Trust Barometer last year found the historic halo effect of technology is fading. Respondents of the global survey expressed that to them, technology is spinning out of control with 61 percent fearing the pace is too fast. Instead, people are looking to brands to be upfront about communicating the downsides as much as the upsides.
As an example, the case for Bitcoin as a store of value is sound. However, it’s also in the stage of price discovery which can lead to high volatility, therefore fintech brands supporting it must be mindful and clearly educate investors on the risks.
Second is understanding that often the criticism against emerging technologies needs to be reframed before they can be addressed. One criticism of Bitcoin is that its blockchain consumes more electricity than Argentina and should be banned due to its environmental impact. This is the wrong argument to be focusing on. We are powering modern technology with energy sources from the last century. Under a similar argument, we should be banning cars since they use petrol. The solution, of course, is to invest in clean and green renewable sources.
But aside from creating new conversations, as senior communications professionals, we should also be counselling brands to get ahead and become a solution to the problem. I believe there is an opportunity for the sector to rally in championing clean technologies and make a commitment to move towards renewable energy sources.
Third is making regulation a blessing, not a curse. Some critics argue the cryptocurrency sector is a wild west exposed to market manipulation, fraud and more, calling for much tougher regulation. Indeed, if we look at last year’s Edelman Trust special report on cryptocurrencies, we found that while trust in cryptocurrency has risen in 22 of the 26 markets we surveyed, it is still distrusted and 60% believe cryptocurrency needs more regulation.
Occasionally, I hear the phrase ‘regulatory arbitrage’ touted as a way of circumventing regulation. Certainly towards the end of last year, some DeFi projects were framed in this way. While it might be tempting to build a business around a loophole, it does not negate the potential in the future for new regulatory rules. To be scalable and maintain a licence to operate, it is essential to maintain a positive attitude toward regulation from day one to get ahead of potential changes. There are many progressive regulators that are open to engaging with the community to better understand how they can shape their rules to support orderly market growth, as well as different associations, accelerators and more that crypto start-ups can also lean on.
Fourth is learning to talk about the future potential of the industry, and thus your start-up, without falling into the hype trap. Only five years ago it was not uncommon to see crypto celebrities promoting their company by making bullish claims on the price of bitcoin. Although there is less of this practice, it is still happening and reinforces the criticism the sector gets. With people still distrusting cryptocurrencies and generally reserved in the trust in which they place on emerging technologies, we must find a smarter way.
As an example, many commentators suggest that CBDCs and cryptocurrencies are a zero-sum game. However a very important point is missed. Right now, the financial system is built around fiat, therefore you simply can’t put CBDCs through it and expect it offer the promise of high efficiency. Fundamentally CBDCs will force the financial system to upgrade and therefore likely support cryptocurrencies. The real story is that cryptocurrency brands are on the cusp of a very tangible move to modernise the global financial system.
Finally, is the need to define a duty of care. In 2015, myself and others in the tech community founded Blockchain For Good, a now defunct think tank which aimed to bring together different minds to define a duty of care for blockchain technology for the greater good of humanity, society and the environment. Although this was a side hustle, it was a very valuable experience and something I would encourage any communications professional to at least participate in at least once.
Where there is a vision of utopia, there is an equal possibility of dystopia. The tension we’re seeing in the crypto world has been created by competing interests, as well as the voids created by a lack of trust and understanding. Defining a duty of care or creating a code of ethics is not only an approach to creating mutual ground amid these tensions, but it’s also the precursor to good governance and a sustainable business. Now more than ever, technology brands need communications professionals with this experience. Open and upfront engagement on such topics is not only an important part of moving beyond the rhetoric and getting on the front foot, but also contributes to the betterment of the sector.
This piece was written by Simon Chan, head of technology Hong Kong and global lead, Emerge at Edelman, a member agency of PRHK. PRHK Viewpoints is an article series contributed by members of PRHK, Hong Kong’s PR & communications association.